Market Theory of School Choice

Market theory can explain much about our school productivity
problem and is about to change schools radically.

Why does the United States, where private industries are the most
productive on the planet, have such unproductive schools? Our
per-student costs for K-12 schools continue to rise substantially and
are third highest among two dozen economically advanced countries. Yet
our students make the least progress in reading, science, and
mathematics. Despite claims of breakthrough programs, unending equality
exhortations, and Title I/Chapter 1 expenditures of $120 billion, the
poverty gap in achievement has remained essentially the same for a
quarter-century.

Market theory can explain much about the school productivity problem
and is about to challenge and change schools radically. It takes
seriously the common- sense idea that people rationally arrange their
affairs to maximize what they value while minimizing their efforts,
costs, and risks. If you think anyone is irrational, perhaps your views
of values and costs differ from theirs. And shouldn't they as free
citizens decide what seems best for themselves?

Rational choice is the fundamental assumption of market theory. It
is a core idea in economics, the quintessential policy science, a
discipline that follows its own efficiency precept by parsimoniously
explaining much about individuals and society with only a few ideas. As
exemplified here, it can account for many of the seeming incongruities
of the school choice controversy.

Market theorists prize individual choice over government or expert
decisionmaking. Who knows better than citizens what will satisfy our
preferences for lunch or what to wear? Given unsubsidized choices, most
of us prefer a private over a government restaurant. We may seek and
even pay for expert advice—but we don't like expert orders.p>

Given
unsubsidized choices, most of us would prefer a private over a
government restaurant.

By definition, voluntary exchange between a buyer and a seller suits
their preferences and makes them both better off; otherwise, they
wouldn't exchange money, goods, and services. To the extent that their
freedom to exchange is abridged by taxes and regulations, they are both
worse off. They are entitled, not to happiness, but to its pursuit. If
free citizens' tastes for food, leisure, health, travel, and education
differ from those of others, they can spend their money and time
accordingly.

Such thinking applies to current public-sector spending by local,
state, and federal governments, which amounts to about 34 percent of
American income. Market theory argues that citizens would be better off
spending much of this themselves or having the greatest possible say in
how it is spent. In this view, decentralized decisionmaking suiting
local preferences is best.

Ultimate decentralization means not even local government but
citizens themselves acting freely, alone or with others. If they see
poverty, injustice, environmental degradation, or inefficiency, then,
within the law, they can allocate their money and energies accordingly,
with or without the assent and coalitions of other like-minded
citizens. They shouldn't, however, be able to impose their morals or
views on others, even if they represent government here to help us or
experts who know what's best.

Overwhelming evidence for the value of individual choice can be
found in comparisons of the quality of life in countries where citizens
are more free to choose with that of countries where governments
decide: South and North Korea, Taiwan and China, Puerto Rico and Cuba,
and, after World War II, Eastern and Western Europe. Greater freedom
assuredly wins.

Market theory argues that citizens would be better off spending
tax dollars themselves, or having the greatest possible say in how
they are spent.

Massive evidence also lies in comparisons of the public and private
provision of goods and services. Studies in two dozen industries, such
as transportation, show that private providers competing with one
another provide cheaper, quicker, and more satisfying goods and
services than do governments in the United States and elsewhere.

Rational choice, the premise of market theory, also explains why
public and private interests seek to exclude competition in the hope of
increasing their power and income while reducing their costs and risks.
Easier it may be to win in courts or legislatures than in the
marketplace. On grounds of expertise, patriotism, tradition, morality,
safety, or other claims, special interests call on government to grant
them legislative and judicial protections against competitors. But
beginning a quarter-century ago, it became clear that the best thing
for American car consumers was the new and unfettered competition
Toyotas and Hondas gave Ford and General Motors.

Providers rationally persuade legislators to write complex
regulations, which exclude new market entrants, which deter innovation,
choice, and productivity. In this respect, government is hardly an
insightful ally of the public. Rather, special interests use government
as a tool to secure private benefits at a cost to others, especially
those least able to represent themselves, namely, the poor and
ill-informed.

Even professions, great and small, try to exclude competitors
through laws and regulations. Physicians try to prevent nurses,
pharmacists, and others from providing cheaper, more convenient, and
desired service. New York City cosmetologists insist that hair braiding
by African and Caribbean immigrants should be illegal without
accredited and expensive training.

Special
interests use government as a tool to secure private benefits at
a cost to others, especially those least able to represent
themselves.

Similarly, teachers' unions press for legislated entry barriers,
which exclude poor, idealistic, and younger and older people with
subject-major baccalaureates and expertise, one of the few predictors
of teaching performance. These potential job competitors lack the
money, time, and inclination for two or three extra semesters of
conventional education courses and practice teaching.

Unions and other status quo interests say: Exclude for- profit and
not-for-profit intruders and require conformity to complex federal,
state, and local regulations. Unions negotiate tough contracts with
complacent school boards that disallow justified dismissals and merit
pay, employed in most industries to raise productivity. Backed by
government, moreover, expert theorists often prevail even if parents
prefer phonics to "whole language," direct teaching to constructivism,
calculation to mathematical feelings, and rigorous standards to
"authentic" self- and peer-assessments.

The antithesis of professional and expert choice, market theory, may
sound radical. And it is radical in the original sense of the word,
which is root. Market theory goes back to the American founders'
insistence on citizens' freedom to choose. In this sense, market theory
opposes Republicans who want to regulate morals and Democrats who want
to regulate economic affairs. It is consistent with the old-speak
meaning of "liberalism" emphasizing freedom and limited government.

Market theory goes back to the founders' insistence on citizens'
right to choose.

School choice makes for incongruous allies, including some classic
and modern liberals as well as some conservatives. Among them are those
who want choice as a governing ideal, economists who want efficiency,
entrepreneurs with new ideas to try, and religious and other parents
who want to preserve their family values. They are joined by big-city
poor and minorities who often face indifferent and inefficient school
bureaucracies thoroughly tied by multitudinous strings that come with
federal funds. Although these groups differ in their views, they aim
rationally for the same ends, namely, charter schools and public and
private vouchers which allow parent voice and choice.

School choice troubles both political parties. If it doesn't affect
their particular industry, some Republicans favor competition. But
suburban Republicans fear choice would bring poor kids to their
schools, which was the undoing of choice legislation in California.
Choice also splits the interests of the Democrats' two biggest and most
reliable factions: the teachers' unions, which fear the competition
that choice engenders, and African-American parents, who favor choice
more than any other ethnic group.

Even while
making inconguous allies, school choice has troubled both
political parties.

A final seeming irony: Much of the rigorous research on school
choice flowed not from conservative think tanks or schools of
education, but from the Brookings Institution and Harvard University,
both thought to be on the left side of many policy issues. Yet, coming
from the left, market theory and findings have even more creditability.
Economist Caroline Hoxby, for example, is a young Harvard superstar
whose biography already has appeared in The New Yorker. Contrary
to conventional claims, she showed that increased competition causes
public schools to improve their efficiency and appeal to retain or
regain their customers. Her recent papers may be found on the Internet
at www.economics.
harvard.edu/faculty/hoxb/papers.html.

The political scientist Paul Peterson of Harvard's John F. Kennedy
School of Government edits big, authoritative books about school choice
that include proponents and opponents, both of which argue largely from
evidence. Mr. Peterson also conducts true experiments, which are rare
in education, a field that more often relies on precedent, anecdote,
conjecture, and moralizing. He randomly assigned mostly poor students
in Dayton, Ohio; New York City; and Washington to remain in their
assigned public schools or to go to private schools of their choice.
Parents and students in chosen schools were substantially more
satisfied with nearly all aspects of their schools, even though the
costs are typically half those of public schools. For Mr. Peterson's
recent papers, see data.fas.harvard.edu/pepg/.

We have reached the end of the beginning of the school choice
conflict.

Such studies are insufficiently well-known by policymakers and
educators. Joseph Bast and I have described much evidentiary research
on market theory applied to education, which is available on the
Internet at www.heartland.org.

We have reached the end of the beginning of the school choice
conflict. We are now likely to see a protracted, intensified, and
fascinating struggle of incongruous coalitions. Some see school choice
as the civil rights struggle of the new century. Others, as the key to
efficiency and technological innovation. Still others, as a way to
preserve their family values or provide the curriculum and instruction
they think best for their children. And for some in public schools, as
their doom or dream. They all hold rational views.

Herbert J. Walberg is a research professor of education and
psychology at the University of Illinois at Chicago and a distinguished
visiting fellow at the Hoover Institution on War, Revolution, and Peace
at Stanford University in Stanford, Calif.

Herbert J. Walberg is a research professor of education and psychology
at the University of Illinois at Chicago and a distinguished visiting
fellow at the Hoover Institution on War, Revolution, and Peace at
Stanford University in Stanford, Calif.

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